I was suggesting cash is a good option right now. Balanced or Growth sometime in the future.
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Cash is a horrible option if you intend to invest / lock it in for 1 or 2 years. As Warren Buffet said, 'why would anyone lend cash ; such as buying gov't bonds, that return only 1 - 2 % when annual inflation is more than 2%?
We're going to see a lot of 'quantitative easing' meaning, the NZ reserve bank is going to print money like hell (no different to other gov'ts abroad). The unfortunate problem with NZ is we can't print our way out of debt. Our NZ currency exchange rate will take a massive hit over the coming years and this leads to higher prices on imported goods.
The NZ tax system is a joke. Consider the negative returns of this financial year and if the funds are invested abroad, they're are wacked with FIF / FDR on the entire managed fund balance. Don't forget, management fee takes a cut.
Why pay RWT on interest income ? It's a for sure way of not beating inflation.
If you lock it in for one or two years wouldn't that be fixed interest rather than cash which is available at a moments notice. Agreed most of what is being done QE etc is to destroy cash and make debt affordable. I would hazard a guess that possibly we are in for a brief period of deflation in asset prices, if the market went down a further 5% this week while you got 0% in cash you would be better off in cash. Time will tell.
The big question would be when is the best time to switch out of cash which we all agree is a good idea.
I won't comment on the pros and cons thereof but I would suggest that this is one of the factors contributing to the wild swings, mainly down, in the current market, ie, the pressure on Kiwisaver providers to sell stock on behalf of account holders who decide to move to cash.
My understanding was Mr valuegrowth had been in a cashfund since 2010 (and would have missed out on the bull run) and was considering moving to a balanced or growth fund. Sometimes being a contrarian can work so if he waited until the other Kiwisavers, have moved to cash it might provide a better entry point. I am hopeless at market timing but it doesn't stop me from trying. I am not suggesting a jump from a growth or balanced portfolio to conservative as he is already in cash, but a bit more patience to see if shares continue down before switching from cash to balanced or growth.
The original question was "My Kiwisaver started in early 2010. 100% cash fund. I feel like I should adjust my kiwisaver now. Is it wise to keep 100% cash? Are there any risks?Thanks in advance."
The biggest risk in cash to me is a debt or currency crisis as company defaults could bring down the banks and the banks give depositors a haircut to get themselves out of the s**t. Or central bank money printing leads to a loss of faith in currencies.
If I am reading my watchlist correctly so far today cash seems like the best option. Not sure what tomorrow will bring.
If banks give depositors a haircut, will if affect my kiwi saver too?Quote:
The biggest risk in cash to me is a debt or currency crisis as company defaults could bring down the banks and the banks give depositors a haircut to get themselves out of the s**t. Or central bank money printing leads to a loss of faith in currencies.
If it is so,I would go for balance fund/growth fund where I can have both cash and shares. Second option is I would put all my eggs in stocks after doing some research. My period for keeping stocks would be about 7 years.
People that hold cash typically lock it into interest bearing deposits or bonds. This is no different to the silly Kiwi Saver fund options between Conservative to Aggressive where the amount of return on the fund (and risk level) is based on the proportion of the investment held in equities and the rest held in interest bearing bonds or cash. (ie. 60/40 80/20 ratios). and I tell you, these fund managers don't have a plan on investing, they take the income streams day after day and just buy an ETF and the rest to some cash/bond fixed interest return. They won't operate a managed fund like hedge funds do or like Berkshire Hathaway would where the cash says in liquid form and buy in times of crisis. As I mentioned before, what point is earning 1 or 2% a year when the gains are far more by buying at the right time.
If you're going to hold cash, hold it in USD currency because it will provide the best option to invest into shares. I don't have confidence that the NZX will rebound as fast as US listings as over there, it's the bigger fish that eats the little fish. In NZ, the fish just die and no one would come along to eat it.
If Valuegrowth is asking what to do with the cash, it may not be to his discretion on how it's invested at the Kiwi Fund mgt level. If he chooses to change the ratio from moving more of the cash into holding more equities, that would all entirely depend on what shares are they investing in? Do you choose NZX listings or overseas ones?
Don't forget, cash is ONLY king when you're planning to seize opportunties and as what I said before, Kiwi Saver funds don't know how to allocate cash to take advantage of a stock market crash; they simply let the individual to DECIDE where to put the funds to in the form of 3 basic risk levels.
If mr value growth had a high risk portfolio.. having the cash fund for the kiwis saver is a great idea...
This is exactly what I've done...
Looking to put the kiwis saver into the highest risk when I think its turned...
:cool:cc
The problem is no one really knows when the market has bottomed out. Likewise, for Mr Value in a cash position, the relevant question would be what did he do for the past 10 years or so hold funds in cash? He would missed a lot of potential gains which is to say holding cash during this period is a poor strategy.
As I always say, cash is ONLY king if you're made the move TO cash in 'right timing'. Likewise, move the cash into equities is a problem of the same timing.
"As an ESG/sustainable manager – they are naturally going to be avoiding things that have not performed relatively well. Oil, airlines and gambling are avoided – and they are parts of the market that have been hardest hit. In fact our head of ESG investing in the US has been highlighting research that ESG tilted funds are performing better than general funds."
https://www.goodreturns.co.nz/articl...y+8+April+2020
Same rubbish, industry approach, for portfolio management I see pushed out by the Finance industry worldwide. Certainly not a view that Buffet (or any reputable hedge fund manager) would advise. No one bases their retirement investment on a 3 or 6 month focus where 'conservative' balanced funds have outperformed aggressive allocated funds. It's so obvious to understand that.
Oil and airlines etc have been crushed... the question to the smart investor is.. where will those asset prices be in 5 or 10 years time? I believe Ben Graham mentioned that you always allocate enough funds to buy at times of distress because the stats show, people have short term memories. Bear markets don't last nearly as long as Bull markets do and judging any investment over how much you have allocated between equities & cash is pointless unless you have the nerve to buy in a bear market and sell in the bull market.
Well done Juno,wow who would have guessed aggressive fund ?
https://www.scoop.co.nz/stories/BU20...+15+April+2020
How’s everyone going here with trying to time the bottom...?
Is it wise to put funds offshore when NZD is weak?
https://www.interest.co.nz/kiwisaver...d-offshore-new
You mean with a weak NZD to the USD, is it wise for CURRENT investors to send their $ abroad? The more appropriate question would be, what has NZ done in the past 10 or 20 years in terms of NZD/USD exchange rate and will the NZD get weaker in the coming 10 to 20 years? Look at the trend, the NZD is not getting stronger and look with your eyes, NZ's standard of living has not improved compared to what has happened in America.
When 70% of ALL monies around the world in terms of value is US dollars, why would holding USD be such a concern or... such a negative?
The article makes no mention about NZ's tax approach that discriminates investors choosing tax free NZ real estate vs buying shares. It is of no surprise those knowledgeable in investing shares choose to invest abroad (question the Kiwi Saver fund managers that the article mentions why).
Let's question with the table's turned around. Why are US investors (or those on the international front) are NOT investing in the NZ sharemarket? If the appeal for investors all over the world look to the US to invest, what does that tell you?
Back in February I exchanged a large portion of my NZD to USD, at a time when the NZD use to be 0.68 some months prior. Was I thinking the NZD was weak? Yes. Was I thinking the NZD will get weaker over the long long term? YES!
Compounded by "dumb" fund managers not actively managing the risks of under performance
https://seekingalpha.com/article/434...content=link-1